An increase in interest rates could provide the long-awaited upturn in business for insolvency specialist Begbies Traynor.

The firm, which has a Liverpool operation at Number One Old Hall Street, had predicted a bonanza with the onset of recession, but historically low interest rates and benign market conditions supported by the Government and banks have helped ‘zombie’ firms, or companies who are able to barely survive, but not prosper.

However, with the Bank of England now talking up a return to interest rate rises, analysts believe Begbies Traynor could be set to prosper from a raft of struggling businesses unable to meet the terms that increased rates would bring.

Begbies today announced its annual results for the year April 30, which showed a fall in revenues from £51.1m to £45.8m, although pre-tax profits of £3.8m compared with £2.4m last time.

It said revenues were impacted by a 9% fall in UK insolvencies during the financial year, while pre-tax profits were better due to lower exceptional items compared with the previous year.

The group also managed to reduce net debt by £2.7m to £14.5m.

Chairman Ric Traynor said: “The group has maintained its market-leading position, having handled the largest number of corporate insolvency appointments in the UK, and delivered solid profits and margins.

“This is despite lower levels of corporate insolvencies in the calendar year 2013 compared to 2012.”

He added: “With the benefit of our reduced cost base, a strong financial position and committed medium and long-term bank facilities, the group remains well placed to take advantage of opportunities to develop and enhance the business, both organically and through selective acquisitions.

“We also retain the capacity and expertise to handle an increase in activity levels should they arise, which would result in improved profitability due to the inherent operational gearing in the business.”

Begbies’ report today said: “In previous economic cycles, the number of corporate appointments has peaked after recessions when the economy enters a recovery phase.

“This is due to a combination of financially stressed companies being unable to finance working capital requirements; higher interest rates giving an increased cost of finance for financially stressed businesses; and banks being willing to crystallise losses on distressed loans, supported by additional appetite from purchasers for distressed assets.

“Although the economy has now entered a cycle of growth, this has not yet impacted on the level of corporate insolvency appointments.”

However, Gary Greenwood, an analyst in the Liverpool office of stockbroker Shore Capital, said the prospect of an interest rate rise could offer “light at the end of the tunnel” for Begbies.

He said: “Begbies reported results that were broadly in line with our expectations on an adjusted basis, but which demonstrated the challenging market conditions that the company continues to endure owing to the low interest rate environment and ongoing bank forbearance.

“However, the prospect of a sustainable rise in interest rates has the potential to act as a catalyst for an increase in the level of insolvencies, in our view, with Begbies well positioned to take advantage.”